City clarifies transfer-tax exemption

Philadelphia’s revenue department is currently updating materials associated with the city’s real-estate transfer tax to raise awareness about a 2007 ruling that expanded the scope of the tax’s exemptions to include same-sex couples.

Rue Landau, executive director of the Philadelphia Commission on Human Relations, said the agency has agreed to modify the Real Estate Transfer Tax Certification form to reflect that financially interdependent persons could be exempt from the tax.

Landau said she was unsure when the change would go into effect.

In November 2007, City Council approved an amendment to the Realty Transfer Tax section of The Philadelphia Code to allow for two people who provide evidence of financial interdependence to be relieved of the 4-percent tax usually incurred when individuals transfer real estate between each other. However, the City Council decision was not widely publicized, which Landau said has led to some uncertainty among both lending companies and citizens.

“It’s possible that the mortgage industry doesn’t know about the exemption and that people aren’t aware of it either,” she said.

Because of this, Landau said she has received only a few complaints from individuals attempting to utilize the exemption.

The current transfer-tax form allows applicants to check off boxes to signify which exemption they’re claiming, such as if the transaction is to an industrial development agency or to the commonwealth, but there is no mention of the FIP exemption.

Landau said the form change will reduce confusion and heighten awareness about the 2007 law.

“This will actually get the mortgage companies and title companies to look at the form and realize that there is another category where same-sex couples can fit in in order to be exempt from the transfer tax,” she said.

Prior to the 2007 City Council ruling, the only couples who could receive the transfer-tax exemption were opposite-sex married couples.

When the city passed its domestic-partner law in 1998, same-sex couples who registered as life partners with the city were relieved of the transfer tax. The following year, however, William Devlin, head of the Urban Family Council, filed suit and in 2002 the Commonwealth Court struck down the life-partners law as unconstitutional.

In 2004, however, the Pennsylvania Supreme Court upheld the domestic-partner law but struck the transfer-tax clause. The court ruled that because the transfer-tax stipulation was crafted to solely benefit same-sex couples and did not apply to unmarried opposite-sex couples, it violated the uniformity clause contained within the Pennsylvania Constitution.

The 2007 City Council legislation, however, encompasses all financially interdependent individuals, regardless of sexual orientation. The law defines financially interdependent people as those “who live together as a single household and who, for at least six months, have agreed to share the common necessities of life and be responsible for each other’s common welfare.”

Under the law, same-sex couples who have registered as life partners with the city do not need to provide any further documentation to prove their financial interdependence, while those in unregistered same-sex relationships or other types of situations would have to provide evidence of their relationships.

Jen Colletta can be reached at [email protected].